More than 2 million Australians are now invested in ETFs, according to the 2023 Betashares/Investment Trends ETF Report, up from 1.9 million at the end of last year.
The report also identified strong growth prospects for the local ETF industry in the year ahead, with 310,000 Australians planning to add ETFs to their portfolio for the first time, the greatest number since 2020.
“Despite another volatile year for markets, and declining investor sentiment, the Australian ETF industry has remained highly resilient, with more investors than ever before investing in ETFs and doing so for a greater part of their portfolio,” said Betashares chief executive officer Alex Vynokur.
Diversification remains the single biggest reason for investors to adopt ETFs, followed by the convenience they provide. Meanwhile, a greater number of investors than in previous years cited the ability to gain exposure to specific overseas markets through ETFs.
In contrast to 2023, during which cash and fixed income were in high demand, a significant jump was observed in the number of ETF investors who plan to add international equities exposure to their portfolio in the future, followed by Australian equities and commodities.
Mr Vynokur said, “2023 was a strong year of fixed income and cash investing, as central banks continued their efforts to get inflation down by raising interest rates.”
“Based on our research, we expect to see a return to more meaningful allocations by investors to growth assets next year, which may see global equities exposures retake their traditional leadership position in terms of the most popular asset class to invest in via ETFs.”
But the Betashares CEO added that fixed income and cash ETFs are still expected to remain popular over the course of 2024 due to the attractive yields on offer and the view that the interest rate hiking cycle is likely nearing its end.
After reporting an average 2 per cent gain in 2023, ETF investors are now expecting average portfolio growth of 6 per cent in 2024.
“Australian ETF investors appear to be generally more optimistic about their portfolio next year, with investors expecting stronger portfolio growth next year,” said Mr Vynokur.
Alongside the 310,000 Australians who expect to start investing in ETFs for the first time next year, 1.39 million existing ETF investors indicated that they intend to reinvest more.
“On the back of continued growth in the number of ETF investors, high levels of accessibility and an ever-increasing universe of ETF solutions, we expect net flows from investors to exceed $20 billion next year, with industry funds under management on track to exceed $180 billion by the end of 2024, up from around $150 billion today,” Mr Vynokur concluded.
While the future appears to be bright for the Australian ETF industry, Betashares recently reported that the industry is worth $6 billion less than it was in August this year, driven by falls in global share markets.
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.